Parent no longer claimed as dependent because of PTC

[cipparulo12345]

A Parent of the spouse of a couple married filing joint was claimed as a dependent on their tax return. Last year it hurt the couples refund because the parent gets health insurance on the exchange.
As you know you have to include the entire household income. The parent has little income and no social security but the taxpayer and spouse was around $130,000.
They lost about $4,000 in refund.
This year they want to not claim the parent as a dependent even though they are she eligible because they don't want to get a smaller refund again. I know you don't have to claim someone if you do not want to.
When I file the parent as single and not as a dependent with no income (they said she has no income) it come out to $12 refund. Something seems wrong about this.

[TaxGuyBill]

When I file the parent as single and not as a dependent with no income (they said she has no income) it come out to $12 refund. Something seems wrong about this.

If the parent CAN be claimed as a dependent, you need to indicate that on her tax return. That will disqualify the Premium Tax Credit and she will need to repay part of the Advance credit (although it will be limited due to her income).

But back up. If she has no income and can be claimed as a dependent, she should NOT be receiving Advance credit due to being a dependent. When applying, she needs to indicate that she can be a dependent and the Marketplace will not give her Advance credit (unless they base it on your client's joint income).

[cipparulo12345]

Drake it odd. There is a box to check that says claimed as a dependent and when you check that box and run the return it says that you cant do this and give the 1095-a to the person claiming the dependent.

[TaxGuyBill]

My software does that too, because dependents don't qualify. You will need to override, and possibly file by paper/postal-mail. And the IRS may have trouble processing the return.

If the parent "attested" that she was not going to be a dependent (which would be the case because they gave her Advance credit) and nobody claims her, it belongs on her tax return.

But as I said, she wrongly applied for the insurance by indicating she was her own 'Tax Family', when she is supposed to be part of your client's tax family. She should have received, and should not be currently receiving, the Advance credit. And she is required to report changes to the Marketplace (telling them she is a dependent).

[Dude]

I wonder if Bill's point is applicable (can be claimed vs is claimed) to Medicaid quaification or since this is handled by states does each state have their own rules.

[TaxGuyBill]

I wonder if Bill's point is applicable (can be claimed vs is claimed) to Medicaid quaification or since this is handled by states does each state have their own rules.

Most states have fully 'expanded' their Medicaid programs and use the federal rules. Those rules are based on who actually claims a person. But for the states that don't follow the federal rules, their qualification criteria varies.

https://www.law.cornell.edu/cfr/text/42/435.603#f